honestly, I run with ChegvyNo1 1.25ghz kernel without setcpu and I see really good temperatures and good battery life. I really dont run games a whole lot, sometimes do, but I am a heavy user otherwise.

I recommend trying a 1ghz kernel for a day are two without SetCPU, use TempMonitor app to keep an eye on temps and then make a decision to move forward.

#1 , What is the stock clock speed for the moto droid?
#2, If I set SetCPU to min 125 max 900 then this is overclocking it 900 correct?
#3, Presuming my assumptions are right in #2 if I wanted to preserve battery life on my droid I would want to set min to lowest it will go IE 125 and then the lower I set the MAX, the better battery life I will get correct?
#4 Why is there a min and max setting on setCPU? Is this designed to work much like the turbo feature in intel chips in that it only overclocks to the higher setting when the cpu max's out and needs it?

1. 550MHz
2. Yup
3. Yup
4. So that your phone will run at a lower clockspeed when you're not using it to save battery, and then go to the max clockspeed when you do use it so that it's more responsive and faster.

1. 250MHz Min, 550MHz Max, or a consistent speed of 550MHz I believe.
2. Yes.
3. Yes, but make sure your Max isn't too low, or you will experience unwanted occurrences, including slowness.
4. The CPU stays at the Min settings until it needs to ramp up. You can define an "Up Threshold" and "Powersave bias" in SetCPU's advanced settings.

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